BJ's Restaurants - Earnings Call - Q2 2020
July 23, 2020
Transcript
Speaker 0
day, ladies and gentlemen. Welcome to the BJ's Restaurants Incorporated Second Quarter twenty twenty Earnings Release and Conference Call. Today's conference is being recorded. At this time, I'd turn the conference over to Mr. Greg Trojan, Chief Executive Officer.
Please go ahead, sir.
Speaker 1
Thank you, operator, and good afternoon, everyone, and welcome to BJ's Restaurants fiscal twenty twenty second quarter investor conference call and webcast. I'm Greg Trojan, BJ's Chief Executive Officer, and joining me on the call today is Greg Levin, our President and Chief Financial Officer. We also have Kevin Mayeroth, our Chief Marketing Officer on hand for Q and A. After the market closed today, we released our financial results for the 2020, which ended on Tuesday, June 30. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.
Our agenda today will start with Rana Schirmer, our Director of SEC Reporting, providing our standard cautionary disclosure with respect to forward looking statements. And I'll then provide an update on our business and current initiatives, and then Greg Levin will provide some commentary on the quarter and the current environment. After that, we'll open it up to questions, and we expect to finish the call in about an hour. So Rona, go ahead, please.
Speaker 2
Thanks, Greg. Our comments on the conference call today will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward looking statements. Investors are cautioned that forward looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Our forward looking statements speak only as of today's date, 07/23/2020.
We undertake no obligation to publicly update or revise any forward looking statements or to make any other forward looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward looking statements contained in the company's filings with the Securities and Exchange Commission.
Speaker 1
Thanks, Rana. Good afternoon, everyone. And while it's only been eleven weeks since our last call, it seems like we've lived through an equivalent of at least three business cycles in that shortest span of time. I'm proud to report that our teams have quickly and effectively adapted our concept, business model and practices over the last four to five months to respond to the many challenges and frequent and sometimes sudden changes operating environment. Throughout it all, the pandemic has served to confirm much of what we thought we knew about our guests and our concept.
The appeal of BJ's to satisfy the basic human desire to dine and socialize with friends and family in an environment like ours continues to be quite powerful despite all the barriers presented today. But it also taught us new things and new ways to address evolving priorities and needs of our guests, many of which we believe will stay with us long past the demise of the virus. So as we begin today's call, I'd like to acknowledge the entrepreneurial spirit of the leaders in our restaurants and here in our support center who are driving our flexibility and adaptation so BJ's can stay ahead of today's changing environment. I will share a few of our learnings as we have navigated the evolving landscape of coronavirus and Greg Levin will follow with more detail on the second quarter and the early trends as we begin Q3. Thus far there have been three distinct chapters in this story we're all navigating through.
The first, of course, was mid March through early to mid May when all of our dining rooms were closed and we were limited to takeout and delivery. During this period, our primary objectives were to operate as leanly as possible while maximizing off premise sales in order to keep as many restaurants as possible open and have as many of our team members working as we could and to maximize our cash flow position to allow us to prepare for the unexpected and take advantage of the opportunities we see coming out of the pandemic. We established new safety and sanitary procedures to create the safest environment we could for our team members and guests. And we greatly reduced the complexity of our menu from about 145 items to around 85, which enabled our managers to run our restaurants as efficiently as possible at greatly reduced sales volumes. We added new off premise friendly menu items at attractive price points and designed new procedures both online and in our restaurants that make it easier and safer to access our food and beverage offerings.
During the course of this phase, we tripled our average weekly off premise sales to the low $30,000 a week range and generated sufficient variable cash flow that we were able to keep all but four of our locations up and running. Our teams accomplished this pivot from regular operations in the span of about two weeks. The second chapter, which began in early to mid May, saw the steady reopening of dining rooms, which by the third week in June had resulted in over 190 of our two zero eight restaurants serving guests in our dining rooms, albeit at reduced capacities to allow for proper social distancing. Coincident with these phased openings, we returned some of our more popular center of the plate protein centric items to our menu, such as our slow roast tri tip, double bone in pork chop and Atlantic salmon. Not surprisingly, despite the continued uncertainty of the world in which we live, people demonstrated the fundamental human desire to begin to return to a new type of normal, including gathering and sharing great food and drinks alongside friends and family.
By the way, they appreciated and demonstrated a desire to go along with all of the safety measures and precautions that we have put in place in these extraordinary times. The size of our dining rooms and available outside space along with the pent up demand for some of our best selling items served us well as we reached weekly sales levels in the mid to high $70,000 range towards the June. Our off premise business continued to be strong during this period, helped by the addition of our new family bundles, which featured our craveable proteins such as slow roasted ribs, Parmesan chicken, Atlantic salmon and ribeye steak at fantastic price points. Off premise sales remain more than double pre COVID levels, while our dining rooms trended to approximately half of normal sales levels by the June. Despite the significant capacity limitations, our reduced operating hours and no operating bars.
The strength of our off premise operations and the other changes I just referenced has established sustainability for this revenue stream and continues to be an important driver of our overall performance. Our current reality and third chapter in all of this is characterized by dining rooms closing again in several states, but most notably in California with increased capacity restrictions in many other markets. As a result, we are currently operating indoor dining rooms in about 70% of our restaurants
Speaker 0
as compared to the peak of 95% in late June. Fortunately,
Speaker 1
are we had already begun adding and expanding outdoor dining in many of our restaurants prior to dining room re closures as we recognized that many guests felt safer and preferred BJ's outdoor dining experiences. We have added or expanded outdoor dining spaces in approximately 90 of our restaurants. We partnered with landlords, local municipalities and liquor license authorities to obtain space and proper permitting to open and operate expanded outdoor dining at breakneck speed. We now have a total of 150 locations that can provide outdoor dining for our guests. Our operating team undertook this endeavor with incredible entrepreneurial enthusiasm.
And as a result, last week, we drove approximately $26,000 per restaurant in incremental sales where we recently closed dining rooms or added or expanded patios. Together with strong off premise growth, we have average weekly sales in the low to mid $60,000 range inclusive of dining room re closures in California and several other localities. Maximizing safe dining experiences where we can, along with continued growth in our off premise revenue remain our highest sales growth priorities at this time. Soon, we will have exciting menu news to help fuel these efforts by way of reintroducing more of our best selling items. Our current plan is to bring back our popular prime rib for both dine in and takeout in mid August.
We're also building upon our family bundles with our very popular slow roasted tri tip that we recently added back to our menu and we're in the process of developing single serve catering options, which will address the need to provide larger groups individually wrapped meal solutions for party sizes of eight or more. We know that in this environment, constant innovation and flexibility is our best strategy for maximizing sales, And there are still a large number of workplace and social interactions, which are looking for an affordable solution to these kind of occasions, which we can address. In addition to our outstanding dining reconfigurations, health and safety initiatives, ability to leverage our large restaurant footprints for social distance in restaurant dining and our variety and menu advantages, we continue to press our proprietary and internally developed technology capabilities to address new opportunities both in our restaurants and with off premise. We were among the first to utilize QR code technology for both menu browsing and mobile payment to provide a touchless experience while dining at BJ's. And mobile payment is now used for approximately one quarter of all our dine in transactions further amplifying for our guests BJ's commitment to health
While one of our earliest initiatives was to offer disposable paper menus, the majority of our guests are now using their mobile devices to peruse and order from our menu. Soon we will enhance the menu experience to transition from the current PDF form factor to a dynamic HTML version, which will permit color and pictures to be followed quickly by dynamic promotions and guest driven navigation. In addition, we have implemented an online reservation solution to accommodate a better limited capacity dining experience. We also improved the quality and frequency of our off premise order status and are in market testing two way testing capabilities to further enhance the convenience of our guests' takeout order experiences. We anticipate permanent changes in consumer expectations and behavior now that guests are accustomed to a digitally enhanced, more convenient dining experience both on and off premise.
BJ's has been a consistent early innovator of dining room and digital consumer tech and our investments and capabilities in these areas are paying dividends during this period of accelerated change. Speaking for our entire management team and all of our stakeholders, we want to send our sincere gratitude to our team members on the front lines in our restaurants and in our support center for their dedication and sales building mindsets during these challenging times. As previously reported, we were forced to temporarily reduce staffing levels across our business when dining rooms shut in late March, and this impacted approximately 16,000 team members. As a number of dining rooms have reopened and sales have grown, we are glad to report that we have now brought back over 10,000 of the impacted team members. We look forward to inviting even more of the team back to support the business as we move forward to regain sales levels commensurate with the pre COVID environment.
At the end of the day, we continue to be focused on the same objectives when the pandemic became an unwelcome reality to all of our lives in early March, maximize our sales by utilizing our unique strengths, the distinctiveness of our brand, concept and iconic food and drinks, the flexibility of our varied menu, the size and layout of our physical spaces to accommodate safe social distancing, our technology infrastructure and innovation that supports on and off premise sales growth, and the trust we have earned from our guests to do the right thing and never sacrifice quality and most of all, our amazing team members. As I noted when we started the call, we are leveraging our flexibility to address the current environment. And based on what we've accomplished with the challenges we faced, I'm confident that BJ's will be one of the true winners in our sector as the country and the world overcome this wicked virus. So Greg?
Speaker 3
Thanks, Greg. As Greg pointed out, there are three distinct chapters of this story so far. And our results from the second quarter reflect the first two chapters of this story regarding the closure of all of our dining rooms in late March and then making great progress methodically reopening dining rooms in 95% of our restaurants by the June. We are currently going through the third chapter here in July with the recent state and local restrictions rolling back dining room reopenings and the fast action of our teams to help mitigate the sales impact of these restrictions by expanding patios and menu locations. As such, my commentary on Q2 and Q3 to date are really a reflection of where we are in the ever changing national, state and local restrictions regarding dining room limitations.
Please remember this commentary is subject to the risks and uncertainties associated with forward looking statements as discussed in our filings with the SEC. From a Q2 perspective, as we noted in today's press release, our comparable restaurant sales were down 57.2% and we reported diluted net loss per share of $1.38 on a GAAP basis. During the quarter, we took a non cash impairment charge of $10,900,000 of which $9,700,000 was related to three restaurants and $1,200,000 was related to a reserve for beer spoilage due to the sudden decrease in draft beer sales caused by the restrictions in our dining rooms. Excluding these charges, our diluted loss per share would have been $0.99 Our comp sales improved throughout the quarter. They were down 74% in April, 63% in May and 40 in June.
By the June, approximately 95% of our restaurant dining rooms were reopened with capacity limitations and our weekly sales volumes improved to the mid-seventy thousand a week range and nearly 80,000 in the week that included Father's Day, demonstrating there continues to be a strong demand for sit down dining. Additionally, our off premise sales, which grew to over 30,000 a week in April when our dining rooms were closed, maintained about 80% of that business in June when the majority of our dining rooms reopened. From a cost and margin perspective, the significant decrease in the sales deleveraged our Q2 margins. Looking at a few highlights, cost of sales in the quarter came in at 25%. We experienced higher cost of sales in April and that was in the mid-twenty 5% range as we transitioned our business to off premise only and worked through excess inventory in the restaurants.
After we worked through the excess inventory, cost of sales for both May and June were in the mid-twenty 4% range, primarily due to mix from our menu, which focused heavily on our deep dish pizza and our family feast menu offerings, offset by lower alcohol sales. As we look out towards the balance of July, I'm expecting cost sales to be slightly higher in Q3, probably in the low to mid-twenty 5% range as we have seen an uptick in commodity costs, especially in proteins. Labor came in at 40.2% and there was significant deleveraging of the fixed manager labor costs and benefits derived from the lower sales volumes, and this was offset by less dining room and kitchen hourly labor as the majority of our sales moved to the off premise channel, coupled with the efficiencies from our limited menu. In April, when all of our dining rooms were closed, hourly labor for BJ's was in the mid teens range as a percent of sales. By June, with the majority of our dining rooms reopened, hourly labor was in the 20% range, which was still 300 basis points below last year's June hourly labor run rate.
Operating occupancy cost per week decreased by about 30% as our teams focused on managing costs. This was done despite incurring approximately $500,000 related for personal protective equipment and additional cleaning supplies necessary for our team members and our guests to dine safely in our restaurants. Following our sales trends for the quarter, our restaurant level operating margin also improved sequentially throughout the quarter. The margin was negative for April and May due to the deleveraging mentioned earlier in my remarks, but turned positive in June. We reached a 13% restaurant level margin in June, showing the amount of cost management and leverage we were able to deliver with sales still well below pre COVID levels.
Backing Greg, I really admire our operators who did an excellent job in driving sales by pivoting to an off premise only business and then shifting back to dine in business with limited capacity, while at the same time managing our costs. What we are describing to you this afternoon in our very short commentary radically understates the effort, commitment, innovation and tenaciousness of our teams and these qualities will serve us well as we continue to adapt to the changing environment and as importantly in the future as the nation overcomes the pandemic. For the quarter, our restaurant level cash flow was basically flat, which is significantly better than what we were expecting earlier in the pandemic despite comp sales starting the quarter down 74% in April. As a result, we finished the quarter with $86,700,000 of cash on our balance sheet with another $50,000,000 of availability and that should be needed on our line of credit. This gives us over $136,000,000 of access to capital to manage, protect and grow our business.
As a reminder, during the second quarter, we took decisive action to bolster our liquidity position by raising $70,000,000 through a common equity offering and extending the maturity of our line of credit to November 2022. Shifting forward to today, as Greg Trojan mentioned, the entrepreneurial spirit of our restaurant operators has resulted in the opening and expansion of approximately 90 patios around the perimeter of our restaurants under large and lighted tents in parking lots. In total, we have 150 patios available to our guests. These new seating accommodations have allowed us to continue to serve our guests in locations where indoor dining is not currently permitted, while increasing our seating capacity in markets where dining capacity is limited. Additionally, our teams are continuing to make off premise sales as easy as possible with new family bundles, contactless, curbside pickup, including new SMS text and email technology, keeping the guests informed of their menu order and allowing the guests to notify the restaurant when they arrive.
Reflecting these factors, and most importantly, the significant short term rollback of open dining rooms, our sales for the July are at about 60% of last year's sales levels. To put that in perspective, in last year's Q3, we averaged approximately 104,000 a week in sales. If we maintain this current run rate, our average weekly sales would be approximately $62,000 for the current quarter. At this sales level, I would expect our cash burn rate inclusive of restaurant level manager bonuses, rent, interest expense and CapEx to be in the range of $500,000 to $1,000,000 a week. Our CapEx for the quarter is expected to be around $5,500,000 which includes adding glassless dividers to the majority of our restaurants to increase seat counts in our dining rooms once they are permitted to reopen and CapEx to complete the construction of our restaurant in the Cleveland market in Orange Village, Ohio, which is scheduled to open later in the fourth quarter as well as some CapEx for other sales and productivity initiatives.
We have the flexibility to pull back on these cash expenditures based on the operating environment as a significant amount of these expenditures are discretionary and are variable. So to recap before we turn it over to questions, the hard work and problem solving creativity of our team members remain key competitive advantages today and will be drivers of the future success as we reconnect with our loyal guests and introduce new guests to our fantastic food and beverages, whether in our dining rooms, our outdoor seating areas or in the comfort of their homes with our takeout and delivery services. From a balance sheet and income statement perspective, we have taken appropriate measures to further strengthen liquidity as we enter the pandemic, possessing one of the industry's strongest balance sheet and have modified costs, operating practices, menu items and other factors to optimize sales and cash flows during this time. Our leading edge investments in technology have enabled us to provide our guests with digital check-in, digital menus and digital payment options and other contactless optionality, but have not reduced the service level guests expect from BJ's. While the current environment has brought unprecedented challenges, BJ's has proven its ability to maneuver and maneuver quickly to preserve the food, drink and dining experience our guests have come to know and love while adapting our business models and practices to drive cash flows during this time.
For these reasons, we remain confident that BJ's is poised to take advantage of the opportunities to prosper in the casual dining industry for years to come and deliver shareholder returns that reflect our industry leadership, brand strength and incredible teams. With that, operator, we'll finish with the formal remarks, and we will open it up to questions.
Speaker 4
Thank
Speaker 0
We'll take our first question from Jeffrey Bernstein with Barclays. Please go ahead.
Speaker 5
Great. Thank you very much. Two questions. First one, just thinking kind of bigger picture, we're trying to find a silver lining here in a very difficult time, but it does seem like you're getting a benefit from accelerating technology introduction, maybe consumer adoption to it. I'm assuming there'll be some potential real estate availability benefits.
Just wondering if you would see it similarly and maybe what you think has been the most favorable to your business or maybe what do you believe will be the greatest sustainable driver to long term market share gains coming out of this crisis? And then I had one follow-up.
Speaker 1
Sure, Jeff. This is Greg Trojan. Look, I don't say this necessarily happily, but I think the biggest benefit is going to be the fact that from a capacity perspective, I think we're going to see meaningful and real reduction in the number of restaurant seats So I put that as the number one driver of sales and market share opportunity. But within the dynamics of the business, I think the as you mentioned, the acceleration of adoption rates around technology, which will, I think, not just today but in the future benefit the fundamental experience of our guests and our team members, we view as a real positive.
And that and it's not just the world of off premise and third party delivery. I think it's also what we're seeing in terms of the speed and convenience of ordering in our restaurant and the receptiveness or ability of our servers to have information of what our guests' needs and wants or etcetera. So I put that as a long standing sustaining benefit of the times we're going through. And you mentioned another one in terms of growth and unit growth opportunities, we are going to see and I think higher quality sites and availability across even some of the tougher markets historically to find quality real estate. I think there's going to be some vacant space to take advantage of even in tight real estate markets like the Northeast, etcetera.
Speaker 5
Is there I mean, you mentioned the real estate. I'm wondering whether there's perhaps a different approach to your as you think about new restaurant real estate. I know you're not doing much this year, but between real estate and design, as you still think about doubling your unit count in this new world, is there different real estate you'd be looking for or different designs? How would you change things as you look to the second half of your growth story?
Speaker 1
Yes. No, that's a good question. Clearly accommodating we were already thinking about this and had made some investments in off premise and making that easier to execute and more accessible to our guests. But I think this has taught us some things and have us thinking about doubling down in terms of true convenience and in terms of off premise sales and curbside, etcetera. So I think that's where you'd see some of the bigger changes.
Speaker 3
Yes. Think, Jeff, as everybody is getting used to delivering off premise, there was a lot of discussion around, how you make the takeout area within the restaurant more convenient for people to come in and grab their food. I think, as Greg mentioned, it's now going be how do you make it more convenient to bring food out to them curbside. So that's a subtle difference there, but it does become a difference in the way we're thinking about designing restaurants in the future, where really the guests no longer are going to be coming out of their cars to pick up their food. And I think the technology that we worked on is big help from that perspective.
And then thinking about where you want to position the maybe the stalls for the cars to pull into, maybe you have to think about it as a kind of a drive thru type setup in regards to giving the food. So there's definitely changes that are going to be coming, I think, within BJ's and probably others within the industry as they think about how to really optimize the off premise part of the business.
Speaker 5
Got it. And just lastly, great, Levin, I know you talked about the June comp versus margin, which I thought was quite impressive. Think you were saying your comps were down 25% to 30% -ish, and yet your restaurant margin was up 13%. So I'm just trying to assess whether it's which line item you generated that type of favorability? Or as we think to the back half of the year, maybe, if your comps are currently down in the 40% -ish range, how do we think about the margin for the third and fourth quarter based on that very impressive result you did in June?
Thanks.
Speaker 3
Well, it's a great question. I think we do get the benefits still with some Father's Day and graduations and things like that that help drive that weekly sales average up from that perspective. I do think though as we look at that, where the benefit that we get in June and thinking about this business going forward is one, we were still doing and continue to do a large portion of your business in off premise. So off premise really allows you to leverage your labor. And as I mentioned in our call, when you think about those margins, I did say that our labor in June, hourly labor was 300 basis points better than it was a year ago.
So that's kind of one of those leverageable areas in our business. I think our menu mix at the time still kept cost of sales relatively low in addition to that. And then as we're continuing to do a lot of business off premise, you just have less, what I would call, daily controllable costs within the four walls of the restaurant. So that gives you the biggest benefit there. The challenge that we have and even trying to think about margins and giving some guidance for you and everybody out there and even for our business internally is it really comes down to consistency.
So as we go started July here and all of a sudden had to go back to an off premise business, that's a challenge for us. It almost becomes a little bit like early or late March and early April, where we set our teams back up to take care of people within the dining rooms and then 62 of our dining rooms get closed down in California and we have to absorb some of that cost and work our way through it. So when I think about our business, we stayed in a steady state. I think we can optimize our margins. I don't know if they necessarily be where June was because of where our sales levels were.
But that's the challenge is really the up and downs that go on in regards to the dining rooms and you lose that consistency. So I don't know if that helped you, Jeff, or confused you more. But really, it comes down to the ability to be consistent in regards to how the sales come in because then we can think about really how you optimize the business.
Speaker 5
Understood. Good luck with that. Thank you.
Speaker 0
We'll take our next question from John Klaas, Morgan Stanley.
Speaker 6
Thanks very much. I wanted to follow-up with you on that theme on a longer term basis. How do you think about going through this process, how much cost do you have permanently reduced in the or eliminated to the business? If you think about if you normalize your AEs over time, do you think restaurant how much better or do you think restaurant margins are permanently better and and by how much? Some of your competitors have talked about rethinking things structurally, permanent reduction in menu, not just temporary.
How do you think about those topics?
Speaker 1
John, I can tell you there's, I think the significant benefits, if you will, tailwinds going forward is, one, you mentioned is, and I've said this early on since prior to the pandemic here, is it's extremely unlikely and certainly not our objective to end up with the same level of pension items that we started that we had in January and February. We're being very careful about what we bring back and when. And that I think particularly for us, clearly our varied menu is a really important part and a great part of our concept. But the benefit of us taking that next level jump, if you will, into complexity reduction, I think, is truly, truly significant and something, honestly, we're excited about. I think the other element here is, again, it's a function of other parts of the economy that are not so great, but is I think the amount of labor rate, wage pressure in the industry and in our business is going to be very different and less than it was going into all of this for quite some time.
And I think what Greg was talking about, the mix between off premise and on premise is going to be another mix advantage here that will help profitability and margins as well. So as much as we that is a benefit, think, look, we're expanding the number of occasions that people are willing and are going to continue to use casual dining for. That's a good thing. And as happy as we are about this, I don't want to lose sight of the fact that the core of our business will still remain dine in social experiences like where we're most differentiated, not that we can't be great at off premise. But the fundamental, as I said in my remarks, kind of human need to gather with friends and family is our physical four walls of our restaurants and the vibrancy of how our bars interact with the rest of restaurant seating.
That feel, that emotion that folks have when they're in our restaurants is something that's still going to be a towering strength of our concept. So I think we all get looked at today's business and in many ways, we view it as a positive in off premise, and we certainly do. But I don't want to lose sight of fundamentally, we're in the sit down social experience business of dine in.
Speaker 6
Yes. And maybe just to that point, when you consider the additional patios that you've added, the dividers that you're going to put in into that, what percent seating capacity does that represent? What is the incremental seating capacity to being able to add to those two pieces?
Speaker 3
Yeah. The dividers, it's a great question. By putting dividers in our restaurants, it's and the way I have to preface it a little bit, John, is it really comes down to once ordinance allow dining capacity to be greater than 25%. That seems to be kind of the benchmark. So when somebody says you're allowed to see up to 50% or 75%, they're still, to some degree, managed by the six feet of social distancing.
So dividers in our restaurants actually should get us somewhere in the neighborhood of 12 to 17 tables on average. So it's actually a nice increase there. And that it would probably get us close to 75% capacity of being able to actually sit in our restaurants, where with six feet of social distancing, we're limited probably closer to 50% to 55%. On the patios, we're getting probably branded patios we're probably getting about 45 seats on the added patios that we've been able to put on there. Looks like you're from 12 to 16 tables, depending on if they're two tops or four tops.
So you're somewhere in the 45 plus in the amount of seats that you're getting.
Speaker 6
Okay. Thank you.
Speaker 0
Take our next question from Chris O'Cull with Stifel.
Speaker 1
Thanks. Good afternoon, guys. I had a couple of questions. One, Greg, how much deferred rent are you carrying on the balance sheet right now? And can you give us a sense of when maybe deferred payments will start to become due and how long you will have to repay any of those payments?
Speaker 3
Yes. It's a great question. I think on the balance sheet, there's two months' worth, which is probably two to three months or somewhere in the $10,000,000 plus range on the balance sheet. We made full payments or whatever we negotiate with our landlords here in July. So we're paying rent going forward.
It's a combination of different payment plans on our different properties there. So I would tend to tell you that starting in July going forward, we are paying rent and some are being amortized this year, some will be amortized next year, some will be amortized twelve months, eighteen months. It's across the board.
Speaker 1
Does the 13% cash margin in June, does that include the actual cash rent payment you made? Or is it the normal straight line rent expense that you would typically book in occupancy?
Speaker 3
Is a 13%, a GAAP 13%. So under generally accepted accounting rules, we're expensing rent every single month, whether we pay it or not. So that 13% is not necessarily a cash number if you think about it from the pure cash, but it's a generally accepted standard accounting practice from that standpoint. So rent expense in there and accounted for like we would account for our margins last year or any other time.
Speaker 1
Okay. And then just given the big shift in business with the closure of the California dining rooms, can you provide an update on cash burn rate assuming those stores remain closed? And then speak to maybe how that changes
Speaker 3
if they Yes, I did on the formal remarks. I said our cash burn rate in assuming we maintain a 60% of historical sales, so kind of a negative 40% comp. Last year in Q3, we did $104,000 in our weekly sales average. So we're basically averaging, let's call it, 62,000 a week in sales today. At $62,000 a week in sales today, we're going to be burning cash anywhere from $500,000 to $1,000,000 a week, really depending on our CapEx, because we want to put those booth dividers in.
We think they have the ability, as we just said, to increase sales dramatically for us. We could take our sales numbers up to have a high ROI from that perspective. And that also includes the manager bonuses and other things that we're putting back into our business to continue to drive sales and move ourselves forward.
Speaker 1
Great. Thanks. Appreciate it.
Speaker 3
You're welcome.
Speaker 0
We'll take our next question from Drew North with Baird.
Speaker 7
Thanks for taking the question. I was hoping you could elaborate a little bit on what you're seeing in market specifically that have reclosed dining rooms in states like California. How consumers reacted following the second shutdown in a given market? How is it different than the first time around, if at all? And I assume there's wide disparity of recent trends depending on the market.
So just any regional color you're willing to provide related to your recent trends or consumer behavior would be interesting. So
Speaker 1
Drew, a couple of things to note there because it is interesting the second time around. And we're largely talking about California, right? So there's a few other municipalities here and there, but the lion's share of second time around dining room closure is by far California for us, right? And the biggest thing that's different is we're allowed and we're prepared in advance, as we mentioned, to provide outdoor dining capability for folks. And I can tell you, you've probably seen the pictures on the news, etcetera, people are taking advantage of outdoor dining.
Going back into spending their lives inside in their homes is not what people have on their mind. You will see if we end up having being legislated or not. But people are out and about. They're being very careful as they do that in our restaurants, but outdoor dining is a big difference. And then just the routine of off premise, people are understanding the convenience more and more and that is already at a higher level than when we started all of this at $10,000 a week.
I think the other thing of note that I think you're asking, but I'll answer regardless is we're not seeing a at this point a softening of sales in other states that in some cases have increased their restrictions and in terms of social distancing or whatever. But just even the mental differential of where we are today versus four weeks ago when I think everyone had a mindset of we're on the right path and opening more than going back to closing some restaurants. That has not yet impacted sales levels in states like Florida and Texas. We're still seeing, again, that fundamental desire of people wanting to dine eat BJ's food.
Speaker 7
Thanks for all the color.
Speaker 0
We'll take our next question from Matthew DiFrisco with Guggenheim.
Speaker 3
Hi, there. I had a couple
Speaker 6
of quick questions. One, it seems like there was either I'm reading the transcript wrong or there was a contradiction here where was June 60% of same store sales? Or was it 70% of year ago volumes?
Speaker 3
June was basically about 70% of year ago volumes. But I think Eamon said in the formal remarks that I gave comps by quarter. So I have to pull up my formal remarks, started at 74%. Think we said June, we were down about 40% in comps. And what we were saying though I think what I'm sorry, Matt, just not to cut you off.
I think what we were talking about there is we went from 74 negative comps to negative 63 to negative 40. What we were talking about is by the June, when 95% of our dining rooms were open is when we started to move ourselves closer to 70% of average unit volumes.
Speaker 6
Throughout the month of
Speaker 3
June, as you'd expect, comp sales got better.
Speaker 6
So is the 13% restaurant margin associated with the down 40 comp, or is it with the 75 ks average weekly sale?
Speaker 3
It's down 40%. It's the entire month of June.
Speaker 6
And you're doing a down 40 now in July, correct?
Speaker 3
Right. But July is again July is going to be lower sales because it's just it's going to be don't forget, you have to think about your ability to leverage your fixed costs, whether it's managers, whether it's rent. The other thing that I was saying earlier is we can maximize margins and any company can maximize margins when you get to consistency and predictability. When the all of a sudden on July 2, somebody comes out and says your dining rooms are now shut, that's going to take a little bit for us to absorb in the first couple of weeks of July before we get back to being able to be able to be a little bit more ability to be able to optimize our business a little bit better.
Speaker 1
I mean, Matt, another way to think about it is the mid to late June just forget about the comps and think about the sales dollars, right? Is in mid to late June, we were driving sales every week and reaching a level, as we said in the last couple of weeks, about $75,000 a week as a company. And now we're talking about being in the low 60s. So forget about the comp sales, think about the actual dollars that might help you.
Speaker 6
Well, that's I understand. Okay. But then the 75,000,000 isn't what you were referring to. You were saying a 40 percent down comp, which is lower than 75% from the year ago levels. But I could call you offline on this and just walk through it a little more, I guess.
With respect to June, did that benefit though also from when the dining rooms opened or viewed your menu with the bundling, it looks very appealing. Are consumers migrating from delivery and doing more pickup? Is that having a natural effect to your margins as well or a benefit, assuming if you look at sort of the three buckets, the best restaurant margin would be I order ahead and pick it up, then would be dining in and then would be delivery. So are we seeing delivery come down from those high levels?
Speaker 1
So it's not coming down. But in terms of rate of growth, we're seeing a lot more growth coming from takeout than we are delivery, but delivery is growing as well. So but the fundamental answer to your question is yes and yes, is that's helping our margins. We're seeing the highest growing element of off premises takeout. And then obviously, the added sales volumes of dine in is helping leverage the fixed cost, what we saw in June.
You got it.
Speaker 6
What would be a benchmark for delivery in your current 62,000 average weekly sale?
Speaker 3
It's probably about a quarter.
Speaker 6
Thank you.
Speaker 0
We'll take our next question from James Rutherford, Stephens Incorporated.
Speaker 8
Hey, good afternoon and thanks for taking the questions. First one is on kind of comp trends. You talked about that run rate of $62,000 of average weekly sales here quarter to date in July, which is a comp of about negative 40%. I was curious if you could share the average sales levels for those units that are closed for indoor dining, so basically in California, So I think it's about 60 units. And did the off premise sales kick back up to a higher level again when those units closed indoor dining there for the second time?
Speaker 3
James, we don't go through and give kind of the unit by unit sales averages from that standpoint. But what I would tell you is absolutely what you just said in the second part is that as the dining rooms close down a little bit, you do see an increase in the off premise side of it from that point. I would generally say California, where we did get the shutdown, obviously, we got the most brand recognition. We got a significant amount of loyal guests. So they tend to do some really good off premise volumes as well.
And people here in California, with the weather the way it is, are enjoying our patios. So we were able to actually move a lot of those guests to the patios.
Speaker 8
Sure. Okay, great. And then at the June, you had regained around 70% of your prior sales volumes according to what you just said, and that's with 95% of units open again for dine in. Just holding aside the second closure of kind of the California indoor dining for a moment, I'm curious what it will take to get back from that 75,000 average weekly sales to something over 100,000 again. Doesn't sound like capacity restraints may be the biggest factor given the size of your restaurant.
So is it a specific daypart? Or is it just kind of generally lower demand given the change in consumer behavior? And what do you think can be done to recover those kind of
Speaker 5
lost sales?
Speaker 1
There's a couple of things there, and it's a good question, James. Keep in mind, capacity is a constraint. I mean, when we were in those last weeks of June and in the 70s, we were think about our average dine in sales line was still about half of what it is normally, right? So even though we are down these are very broad numbers, as we said, about 30% in comps in those best weeks, it was the growth in off premise overcoming still about 50% traffic numbers from dine in. So yes, we need more effective capacity.
Even in a world of virus threats, up the barriers and increasing the effective capacity of our restaurants is going to be a near term help aside from restrictions, right? But the other big thing that needs to happen is we are operating I mean one of the great things about our concept is we run busy restaurants from eleven in the morning to eleven and twelve at night, right? And we totally lost that late night aspect of our business, A. And B, the alcohol centric element occasions of our business that rely on bar business in and of themselves have been greatly compromised along with that, right?
So I would say overall capacity, but in particular, those shoulder periods, particularly late night are going to be really important. And then last but not least is the return to sports in America is going to be helpful for lots of reasons, mental health among them, speaking personally. But I do think the occasions to gather in safety to be able to gather in groups and go see games and other events is going to be a part of the puzzle for sure.
Speaker 8
Okay. That's very helpful. Thank you.
Speaker 5
You're welcome.
Speaker 0
We'll take our next question from Sharon Zackfia, William Blair.
Speaker 4
Hi, good afternoon. Actually, just follow-up on that last comment. I I know you've got the family bundles, and they've been around for a few months. Is there a thought about doing something for off premises game day bundles?
Speaker 1
I think we've done some some promotional thinking, and, like, we have plenty like our wings. Like, there's we may not label them as as such in particular, but we are have been thoughtful about really using the wide variety of appetizers and pizza, for instance, to satisfy those kind of occasions. I think one of the bigger opportunities, Sharon, might be just because it may have gotten lost in my remarks, that's similar, not exactly what you're asking is, individualized large group orderings, right? So think about catering coming in half pans and being scooped and shared by ten, twelve, 15 people. There are a lot of occasions that that's not going to be appropriate as it was just a few months ago.
So whether it's a family gathering or an office event or etcetera, it's going to the need for individual portions versions of group gatherings is something that occurs to us as being a real need and something that we're working on. It could work for game days, but I think there's a broad number of kind of occasions that we can sell our value and variety.
Speaker 3
And just offhand, Sharon, digitally today, we already have something out there, highways, baseball with pictures of our deep dish pizza, the tzatziki, our beer, everything that travels really well. So we're not letting open day go for notch.
Speaker 1
Especially since the Dodgers are part of the ceremony, so.
Speaker 4
I guess a question on the patios and the outdoor seating that you've implemented. I know you said you have about 150 locations now that have those. Not all of us live in Southern California. So I'm just curious kind of what number of those would you consider kind of seasonal, whereas the fall comes or starts to get colder, it's not as relevant? And then Greg, just either Greg, are you still comfortable with what you had said on the last call, which is, I think, $65,000 in average weekly sales for corporate breakeven?
Speaker 3
Yes. So let me take the second part first here. I got to think about our patios for a second. I still do. I think the real change actually, I'd almost argue that, that number could have come down a little bit.
But we decided to be, at least at the time, aggressive at least during the quarter about putting up the dividers, putting up the glass dividers, investing in patios and some other things that we think really drive sales. And as a result of my formal remarks, I kind of said that we have the optionality on this part of our business to pull back if we need to, to kind of manage our burn rate and maybe bring it down a little bit. But I still think it's around $65,000 from that standpoint. And again, as said in the full model market, if our business goes a different way and we don't like where we're going, we have that ability on certain variable costs and CapEx costs that we would pull that back and manage accordingly.
Speaker 1
So let me follow-up on that while you're taking through the math. A lot of them are in California, thank goodness. So but Sharon, just to reinforce a little bit what Greg said, because there's really two different things and it's good to clarify this is, I think our burn our breakeven sales rate, if anything, as Greg said, might be a little lower than what we anticipated before in pullback every most, if not every, discretionary expense, right? So what I don't know, I wouldn't say different, but we're anticipating I'll give you a prime example is we really anticipate paying our managers bonuses in Q3. They're working hard, the key to our success here.
And in the original $65,000 breakeven, it does not contemplate variable labor expense, right? So our actual breakeven is somewhat something a little bit higher than $65,000 when you incorporate increased level of CapEx coming from partitions, manager bonuses, etcetera. But from a if we have to pull back, it's probably gotten a little lower than 65%. But our anticipation in terms of expense rate sitting here today is probably something somewhat higher than that, if that makes sense.
Speaker 3
And then on the patios, you know, we've got over 50% of our restaurants are in California, Texas, and Florida. Little bit more mild weather states in that regards. California, Texas and Florida, little bit more mild weather states in that regards. I think we have about 110 when we build those patios out. They are going to be more of an all season patio in that regard.
So when we talk about 150 patios in total, we probably added 40 additional patios. And then on the current 110, we continue to expand those ones by putting tents out in the parking lot and other areas. So I think we've got I don't know the exact numbers here from patios at each location, but I think we've got maybe somewhere around 50% of our 200 restaurants that at least have, what I would consider Patios built with the restaurants with harder lids and so forth that could be used a little bit more year round.
Speaker 4
Okay. Thank you.
Speaker 0
We'll take our next question from Nicole Miller, Piper Sandler.
Speaker 2
Thank you. Good afternoon. Appreciate the update. I wanted to go back to the commentary around pizza. It sounded like you had what was a fairly material COGS benefit.
Can you talk about what pizza mix was? I think you said the May, June time frame. And then it's just so reminiscent to the core DNA of the brand and and seriously has serious margin implications. I understand that CJ's has become much bigger and broader, but how do you think about that return to the core, if you will?
Speaker 1
Yes. I'll take a stab at that, Nicole. First of all, we love and always consider pizza a part of the core. I think in times like this where I think it's hard to argue that value isn't and is not going to be more important than ever, pizza gives us a great ability to deliver amazing value to our guests. When we went sort of above and beyond and doubled down with half off large pizzas, I've said this, I think, on the prior call around we consider we're going to continue that offer on an off premise basis for the foreseeable future.
It's been one of the stars of off premise sales growth along with our $6 entrees and our family feast and bundles. So we love that. We love the value pizza brings to our guests. I think we've been, if anything, improved that value and are definitely in the forefront of our mind is what else can we do in even in a world where all of our dining rooms are open to continue to leverage pizza even in a bigger way from a value perspective. But having said that, keep in mind, we're making this point again in the last call is we're not managing percentage margins, we're managing dollars.
And there's no question either that when we brought back our center of the plate proteins as part of our menu in what we call our Phase II menu, mostly in June and whatever, that had a huge impact on check and dollar sales as people were dying for things like our Tri Tip and consistent salmon dishes in our restaurant. So it's not an eitheror. But to your point, again, we really love the fact that pizza is part of our arsenal, particularly value sensitive times.
Speaker 2
And we definitely wouldn't want to lose sight. I think that's very important, the dollars versus the percentages, because we took the dollars to the bank. Can you just share as a follow-up,
Speaker 4
you think it's how it moved in terms
Speaker 2
of mix? I mean, did it really move the needle? It seems like it must have.
Speaker 3
Yes. I mean, it doubled as a percent. Again, we went from 145 items down to 80 items, really emphasized it and so forth. So the mix as a percent of sales doubled, from that perspective.
Speaker 2
All right. Thanks, guys. Appreciate it.
Speaker 3
You're welcome.
Speaker 0
We'll take our final question from Todd Brooks, CL King and Associates.
Speaker 5
Hey, good afternoon, everybody. Just one question to wrap it up. I'm trying to think about and it takes capacity restrictions out of the discussion a little bit, but if you look at the $104,000 of average weekly sales in Q3 last year, if you remove kind of that late night piece of the mix and the bar piece of the mix, what's the right bogey that we should be looking at? If you're performing as well as you can against the available opportunity, is are we looking at $85,000 in average weekly sales without those two opportunities? And if we're getting back to the mid-60s, we're really three quarters of the way back in the addressable periods that we're able to serve customers in?
Speaker 1
It's a mixture. I mean, Greg, think on the actual daypart part of it, your question, Todd, because it's a good one. But also, we need it's it's part they part in its part bars being open in occasions that are more alcohol friendly, I'll call it. Right? So even at 06:00 in the afternoon you know, not in the evening when our dining rooms were open, we weren't doing the same, alcohol driven traffic.
Now interestingly, alcohol mix in incidents was higher than pre COVID, And I attribute that to just like people got a drink in this time like today. So when they were in our restaurants, they were drinking more. But it wasn't again, the traffic around the bars and the occasions to see sporting events, etcetera, weren't there in the same element. So again, the dollars of alcohol spending weren't there. But yes, we need both, obviously, to drive that.
I don't know, Greg, if you have a guess on I
Speaker 3
don't. I mean, I think you could probably 12% for late night by itself because that part of our business is purely dropping off. But to Greg Trojan's comment, and he's absolutely right, it's the fact of having people come into the bar in the middle of the afternoon and other types of events coming in that drive your capacity up in your restaurants. So if you want to take the 104,000 and multiply it by 90% or something, you can kind of say, okay, 90,000 is the bogey, just lopping off of that part. But there's still a lot of middle afternoon and other things that drive people into the business that we're just you're just not getting today that you would get in a pre COVID environment.
Speaker 1
But just intuitively, without looking at numbers, I think you're in the ballpark there. I think if thought about us doing low to mid-70s in that June time period, you're probably somewhere in 80,000 to $85,000 a week those things in terms of like ultimate full utilization in a compromised way, if that makes any sense. You're probably not far off.
Speaker 5
That's very helpful. Thank you both very much.
Speaker 3
Welcome.
Speaker 0
Ladies and gentlemen, this does conclude today's question and answer session and today's conference. We appreciate your participation. You may now disconnect.
Speaker 1
Thank you.
Speaker 3
Thank you, everyone.